By Jay Friday | Head of Wealth Management Planning, Citizens
Since its inception in 1935, Social Security has been providing Americans and their beneficiaries with economic assistance in old age, retirement, and in the event of disability. For many, Social Security is at the center of their retirement plan.
But for those fortunate enough not to be leaning too heavily on Social Security in retirement, the details of the benefits may not be clear — but they are important. Here are some answers to commonly asked questions about Social Security.
Social Security was established to provide retirees over 65 years of age with financial benefits based on ongoing payroll contributions. There have been many updates since then, but the basic purpose remains the same: to give older Americans a financial safety net.
Social Security works by essentially paying it forward … to yourself. While this isn’t literally the case, the basic idea is that you put aside a percentage of every paycheck you get into a Social Security fund. (You can see how much by looking at the FICA box on your paycheck.) This money is invested by the U.S. government and, eventually, paid out as Social Security benefits to qualified individuals.
You qualify for Social Security by paying into the Social Security system and earning "credits." You need 40 credits to be eligible to receive Social Security. You can earn a maximum of four credits per year, so you effectively need to have contributed to the Social Security system for at least 10 years to receive a benefit.
The United States Social Security system is funded through Federal Insurance Contributions Act (FICA) taxes. The Social Security Administration (SSA) levies a 12.4% tax on earnings (6.2% is paid by you, and 6.2% is paid by your employer) to fund Social Security benefits.
Creating a Social Security account is easy. Just go to the Social Security website and select “Create an Account.” It’s free and once you sign up, you can access personalized estimates of future benefits, see your last statement, review your earnings record and history, and more. To qualify for an account, you must be 18 or older and have a Social Security number (SSN), valid U.S. mailing address, and valid email address.
You can start taking your Social Security retirement benefits when you turn 62. But be warned: if you do take them at this early age, your benefits will be 25% less than if you wait until your Full Retirement Age (FRA), at which time you’ll get 100% of what you’ve earned. And if you wait even longer (up to age 70), your benefits will increase even more. You can find your Social Security Retirement Age in the chart below.
Full retirement age is determined based on your year of birth. See the chart below to figure out yours:
Year of Birth |
Full (normal) Retirement Age |
1937 or earlier | 65 |
1938 | 65 and 2 months |
1939 | 65 and 4 months |
1940 | 65 and 6 months |
1941 | 65 and 8 months |
1942 | 65 and 10 months |
1943-1954 | 66 |
1955 | 66 and 2 months |
1956 | 66 and 4 months |
1957 | 66 and 6 months |
1958 | 66 and 8 months |
1959 | 66 and 10 months |
1960 and later | 67 |
The answer depends on your particular situation. If you need income to support yourself at age 62, you may not have a choice but to start taking your benefits. But the longer you wait, the more you will get per month, and over time. One of the ways to determine when you should start taking your benefits is to calculate a break-even age. Let me give you an example: Say your FRA is 65 and your full monthly benefit is $1,000/month. If you choose to start taking your benefits at 62, you’ll only receive 80% of those benefits, or $800/month. But if you wait until 65 to start taking your benefits, you receive 100% of your benefits, or $1,000/month. As you can see in the chart below, the break-even age is 77 because that’s the age at which your total benefits in Scenario 2 exceed the total benefits you receive in Scenario 2.
Age |
Scenario 1 |
Scenario 1 |
(Taking benefits at 62 and receiving only 80% of benefits) | (Taking benefits at 65 and receiving 100% of benefits) | |
62 | $800 | |
63 | $1,600 | |
64 | $2,400 | |
65 | $3,200 | $1,000 |
66 | $4,000 | $2,000 |
67 | $4,800 | $3,000 |
68 | $5,600 | $4,000 |
69 | $6,400 | $5,000 |
70 | $7,200 | $6,000 |
71 | $8,000 | $7,000 |
72 | $8,800 | $8,000 |
73 | $9,600 | $9,000 |
74 | $10,400 | $10,000 |
75 | $11,200 | $11,000 |
76 | $12,000 | $12,000 |
77 | $12,800 | $13,000 |
78 | $13,600 | $14,000 |
79 | $14,400 | $15,000 |
80 | $15,200 | $16,000 |
81 | $16,00 | $17,000 |
One thing to remember is that there’s no right or wrong here. For some people, waiting to take benefits isn’t an option. Your life expectancy is also an important variable when considering what’s right for you. In this example, if you expect to live long past 77, Scenario 2 may be your best choice.
To get a new Social Security card, or to replace or correct errors on your original card, fill out this form. It’s free, easy, and just takes a few minutes. But keep in mind that it’s not essential that you have an actual card. In most cases, just knowing your Social Security number is all you’ll need.
In the excitement of bringing a new life into the world, getting your newborn a Social Security number is probably not your top priority. But the easiest time to do this is when you’re giving personal information for your child’s birth certificate while you’re still at the hospital.
You don’t have to, but if you wait to apply for a number at a Social Security office, there may be delays while they verify the birth certificate. You’ll need a Social Security number to claim your child as a dependent on your income tax return as well as to open a bank account in their name, buy them a savings bond, get medical coverage, or apply for federal government services.
It’s comforting to know that if you die, your Social Security benefits will be paid to your eligible spouse or dependent children, also known as survivor benefits. How much they’ll get depends on a few factors, such as the age that you started receiving your benefits. The longer you waited to start receiving benefits, the higher percentage of your benefits they’ll receive.
We’ve all heard people talk about Social Security checks, but the reality is almost all benefits are now delivered electronically through direct deposit to a bank account. In fact, since 2013, it’s required that you enroll in direct deposit in order to receive your Social Security benefits.
Even though Social Security may not be your main source of income in retirement, there’s a lot to know about how to coordinate your benefits with your other retirement income streams. To ensure that you’re made ready for retirement, schedule a Citizens Retirement Checkup at your nearest Citizens branch or request a call back from a Citizens Wealth Management Advisor.
Find out how close you are to the retirement you want.
Get the detailsLearn about the many considerations to take into account, plus some rules of thumb.
Learn moreMake an appointment with a financial consultant near you.
Find a branch near you© Citizens Financial Group, Inc. All rights reserved. Citizens is a brand name of Citizens Bank, N.A. Member FDIC
Disclaimer: Views expressed may not necessarily reflect those of Citizens. The information contained herein is for informational purposes only as a service to the public, and is not legal advice or a substitute for legal counsel, nor does it constitute advertising or a solicitation. You should do your own research and/or contact your own legal or tax advisor for assistance with questions you may have on the information contained herein.
Citizens Wealth Management is comprised of both banking and brokerage affiliated companies.
References to resources or organizations listed in this article do not constitute or imply endorsement or support by Citizens.